by Adam Hartung | Feb 11, 2012 | Current Affairs, In the Rapids, Innovation, Leadership, Television, Web/Tech
Buy Facebook. I don't care what the IPO price is.
Since Facebook informed us it was going public, and it's estimated IPO valuation was reported, debate has raged over whether the company could possibly be worth $75-$100B. Almost nobody writes that Facebook is undervalued, but many question whether it is overvalued.
If you are a trader, moving in and out of positions monthly and using options to leverage short-term price swings then this article is not for you. But, if you are an investor, someone who holds most stock purchases for a year or longer, then Facebook's IPO may be undervalued. The longer you can hold it, the more you'll likely make. Buy it in your IRA if possible, then let it build you a nice nest egg.
About 85% of Facebook's nearly $4B revenues, which almost doubled in 2011, are from advertising. So understanding advertising is critical to knowing why you want to buy, and hold, Facebook.
Facebook has 28% of the on-line display ad market, but only 5% of all on-line advertising. On-line advertising itself is generally predicted to grow at 16%/year. But there is a tremendous case to be made that the market will grow a whole lot faster, and Facebook's share will become a whole lot larger.
At the end of January Proctor & Gamble's stock took a hit as earnings missed expectations, and the CEO projected a tough year going forward. He announced 1,600 layoffs, many in marketing, as he admitted the ad budget was going to be "moderated" – code for cut. While advertising had grown at 24%/year sales were only growing at 6%. He then admitted that the "efficiency" of on-line advertising was demonstrating the ability to be much higher than traditional advertising. In other words, he is planning to cut traditional marketing and advertising, such as coupon printing and ads in newspapers and television, and spend more on-line.
P&G spends about $10B/year on advertising. 2.5x the Facebook revenue. Now, imagine if P&G moves 10% – or 25% – of its advertising from television (which is now a $250B market) on-line. That is $1-$2.5B per year, from just one company! Such a "marginal" move, by just one company, adds 1-3% to the total on-line market. Now, magnify that across Unilever, Danon, Kimberly-Clark, Colgate, Avon, Coke, Pepsi …… the 200 or 300 largest advertisers and it becomes a REALLY BIG number.
The trend is clear. People spend less time watching TV and reading newspapers. We all interact with information and entertainment more and more on computers and mobile devices. Ad declines have already killed newspapers, and television is on the precipice of following its print brethren. The market shift toward advertising on-line will continue, and the trend is bound to accelerate.
Last year P&G launched an on-line marketing program for Old Spice. The CEO singled out the 1.8 billion free impressions that received on-line. When the CEO of one of the world's largest advertisers takes note, and says he's going to move that way, you can bet everyone is going to head that direction. Especially as they recognize the poor "efficiency" of traditional media spending.
And don't forget the thousands of small businesses that have much smaller budgets. Most of them rarely, or never, could afford traditional media. On-line is not only more effective, but far cheaper. Especially as mobile devices makes local marketing even more targeted and effective. So as big companies shift to on-line we can expect small to medium sized businesses to shift as well, and new advertisers are being created which will expand the market even further. This trend could lead to a much faster organic market growth rate beyond 16% – perhaps 25% or even more!
Which brings us back to Facebook, which will be the primary beneficiary of this market shift.
Facebook is rapidly catching up with Google in the referral business. 850 million users is important, because it shows the ability Facebook has to bring people on-line, keep them on-line and then refer them somewhere. The kind of thing that made Google famous, big and valuable with search a decade ago. In fact, people spend much more time on Facebook than they do Google. When advertisers want to reach their audience they go where the people are (and are being referred) and that is Facebook. Nobody else is even close.
The good thing about having a big user base, and one that shares information, is the ability to gather data. Just like Google kept all those billions of searches to analyze and share data, increasingly Facebook is able to do the same. Facebook will be able to tell advertisers how people interact, how they move between pages, what keeps them on a page and what leads to buying behavior. Facebook uses this data to help users be more effective, just like Google does to help us do great searches. But in the future Facebook can package and sell this data to advertisers, helping them be more effective, and they can use it for selling, and placing, ads.
Facebook usage is dominant in social media, but becoming more dominant in all internet use. Like how Windows became the dominant platform for PC users, Facebook is well on its way to being the platform for how we use the web. Email will be less necessary as we communicate across Facebook with those we really want to know. Information on topics of interest will stream to us through Facebook because we select them, or our friends refer them. Solving problems will use referrals more, and searching less. The platform will help us be much more efficient at using the internet, and that reinforces more usage and more users. All the while attracting more advertisers.
The big losers will be traditional media. We may watch sports live, but increasingly we'll be unwilling to watch streaming TV as the networks trained boomers. Companies like NBC will suffer just as newspaper giants such as Tribune Corp., New York Times and Dow Jones. Ad agencies will have a very tough time, as ad budgets drop their placement fees will decline concomittantly. Lavish spending on big budget ads will also decline.
Anyone in on-line advertising is likely to be a winner initially. Linked-in, Twitter, Pinterest and Google will all benefit from the market shift. But the biggest winner of all will be Facebook.
What if the on-line ad market grows 25%/year (think not possible? look at how fast the smartphone and tablet markets have grown while PC sales have stagnated last 2 years as that market shifted. And don't forget that incremental amount could easily happen just by the top 50 CPG companies moving 10% of their budget!)? That adds $20-$25B incrementally. If Facebook's share shifts from 5% to 10% that would add $2-2.5B to Facebook first year; more than 50%!
Blow those numbers up just a bit more. Say double on-line advertising and give Facebook 20% share as people drop email and traditional search for Facebook – plus mobile device use continues escalating. Facebook revenues could double up, or more, for several years as trends obsolete newspapers, magazines, televisions, radios, PCs and traditional thoughts about advertising.
If you missed out on AT&T in the 1950s, IBM in the 1960s, Microsoft in 1980, or Apple in 2000, don't miss this one. Forget about all those spreadsheets and short-term analyst forecasts and buy the trend. Buy Facebook.
by Adam Hartung | Jan 22, 2012 | Defend & Extend, In the Rapids, Innovation, Leadership, Lock-in, Transparency, Web/Tech
Turning over a new year inevitably leads to selections for "CEO of the Year." Investor Business Daily selected Larry Page of Google 3 weeks ago, and last week Marketwatch.com selected Jeff Bezos of Amazon. Comparing the two is worthwhile, because there is almost nothing similar about what the two have done – and one is almost sure to dramatically outperform the other.
Focusing on the Future
What both share is a willingness to focus their companies on the future. Both have introduced major new products, targeted at developing new markets and entirely new revenue streams for their companies. Both have significantly sacrificed short-term profits seeking long-term strategic positioning for sustainable, higher future returns. Both have, and continue to, spend vast sums of money in search of competitive advantage for their organizations.
And both have seen their stock value clobbered. In 2011 Amazon rose from $150/share low to almost $250 before collapsing at year's end to about $175 – actually lower than it started the calendar year. Google's stock dropped from $625/share to below $475 before recovering all the way to $670 – only to crater all the way to $585 last week. Clearly the analysts awarding these CEOs were looking way beyond short-term investor returns when making their selections. So it is more important than ever we understand what both have done, and are planning to do in the future, if we are to support either, or both, as award winners. Or buy their stock.
Google participates in great growth markets
The good news for Google is its participation in high growth markets. Search ads continue growing, supplying the bulk of revenues and profits for the company. Its Android product gives Google great position in mobile devices, and supporting Chrome applications help clients move from traditional architectures and applications to cloud-based solutions at lower cost and frequently higher user satisfaction. Additionally, Google is growing internet display ad sales, a fast growing market, by increasing participation in social networks.
Because Google is in high growth markets, its revenues keep growing healthily. But CEO Page's "focus" leadership has led to the killing of several products, retrenching from several markets, and remarkably huge bets in 2 markets where Google's revenues and profits lag dramatically – mobile devices and search.
Because Android produces no revenue Google bought near-bankrupt Motorola to enter the hardware and applications business becoming similar to Apple – a big bet using some old technology against what is the #1 technology company on the planet. Whether this will be a market share winner for Google, and whether it will make or lose money, is far from certain.
Simultaneously, the Google+ launch is an attempt to take on the King Kong of social – Facebook – which has 800million users and remarkable success. The Google+ effort has been (and will continue to be) very expensive and far from convincing. Its product efforts have even angered some people as Google tried steering social networkers rather heavy-handidly toward Google products – as it did with "Search plus Your World" recently.
Mr. Page has positioned Google as a gladiator in some serious "battles to the death" that are investment intensive. Google must keep fighting the wounded, hurting and desperate Microsoft in search against Bing+Yahoo. While Google is the clear winner, desperate but well funded competitors are known to behave suicidally, and Google will find the competition intensive. Meanwhile, its offerings in mobile and social are not unique. Google is going toe-to-toe with Apple and Facebook with products which show no great superiority. And the market leaders are wildly profitable while continuously introducing new innovations. It will be tough fighting in these markets, consuming lots of resources.
Entering 3 gladiator battles simultaneously is ambitious, to say the least. Whether Google can afford the cost, and can win, is debatable. As a result it only takes a small miss, comparing actual results to analyst expectations, for investors to run – as they did last week.
Amazon redefines competition in its markets
CEO Bezos' leadership at Amazon is very different. Rather than gladiator wars, Amazon brings out products that are very different and avoids head-to-head competition. Amazon expands new markets by meeting under- or unserved needs with products that change the way customers behave – and keeps competitors from attacking Amazon head-on:
- Amazon moved from simply selling books to selling a vast array of products on the web. It changed retail buying not by competing directly with traditional retailers, but by offering better (and different) on-line solutions which traditional retailers ignored or adopted far too slowly. Amazon was very early to offer web solutions for independent retailers to use the Amazon site, and was very early to offer a mobile interface making shopping from smartphones fast and easy. Because it wasn't trying to defend and extend a traditional brick-and-mortar retail model, like Wal-Mart, Amazon has redefined retail and dramatically expanded shopping on-line.
- Amazon changed the book market with Kindle. It utilized new technology to do what publishers, locked into traditional mindsets (and business models) would not do. As the print market struggled, Amazon moved fast to take the lead in digital publishing and media sales, something nobody else was doing, producing fast revenue growth with higher margins.
- When retailers were loath to adopt tablets as a primary interface for shoppers, Amazon brought out Kindle Fire. Cleverly the Kindle Fire is not directly positioned against the king of all tablets – iPad – but rather as a product that does less, but does things like published media and retail very well — and at a significantly lower price. It brings the new user on-line fast, if they've been an Amazon customer, and makes life simple and easy for them. Perhaps even easier than the famously easy Apple products.
In all markets Amazon moves early and deftly to fulfill unmet needs at a very good price. And then it captures more and more customers as the solution becomes more powerful. Amazon finds ways to compete with giants, but not head-on, and thus rapidly grow revenues and market position while positioning itself as the long term winner. Amazon has destroyed all the big booksellers – with the exception of Barnes & Noble which doesn't look too great – and one can only wonder what its impact in 5 years will be on traditional retailers like Kohl's, Penney's and even Wal-Mart. Amazon doesn't have to "win" a battle with Apple's iPad to have a wildly successful, and profitable, Kindle offering.
The successful CEO's role is different than many expect
A recent RHR International poll of 83 mid-tier company CEOs (reported at Business Insider) discovered that while most felt prepared for the job, most simultaneously discovered the requirements were not what they expected. In the past we used to think of a CEO as a steward, someone to be very careful with investor money. And someone expected to know the business' core strengths, then be very selective to constantly reinforce those strengths without venturing into unknown businesses.
But today markets shift quickly. Technology and global competition means all businesses are subject to market changes, with big moves in pricing, costs and customer expectations, very fast. Caretaker CEOs are being crushed – look at Kodak, Hostess and Sears. Successful CEOs have to guide their businesses away from investing in money-losing businesses, even if they are part of the company's history, and toward rapidly growing opportunities created by being part of the shift. Disruptors are now leading the success curve, while followers are often sucking up a lot of profit-killing dust.
Amazon bears similarities to the Apple of a decade ago. Introducing new products that are very different, and changing markets. It is competing against traditional giants, but with very untraditional solutions. It finds unmet needs, and fills them in unique ways to capture new customers – and creates market shifts.
Google, on the other hand, looks a lot like the lumbering Microsoft. It has a near monopoly in a growing market, but its investments in new markets come late, and don't offer a lot of innovation. Google's products end up competing directly, somewhat like xBox did with other game consoles, in very, very expensive – usually money-losing – competition that can go on for years. Google looks like a company trying to use money rather than innovation to topple an existing market leader, and killing a lot of good product ideas to keep pouring money into markets where it is late and not terribly creative.
Which CEO do you think will be the winner in 2015? Into which company are you prepared to invest? Both are in high growth markets, but they are being led very, very differently. And their strategies could not be more different. Which one you choose to own – as a product customer or investor – will have significant consequences for you (and them) in 3 years.
It's worth taking the time to decide which you think is the right leadership today. And be sure you know what leadership principles you are adopting, and following in your organization.
by Adam Hartung | Jun 30, 2011 | Current Affairs, In the Swamp, Leadership, Web/Tech
Google rolled out its newest social media product this week. Unfortuntately for Google investors, this is not a good thing.
Internet usage is changing. Dramatically. Once the web was the world’s largest library, and simultaneously the world’s biggest shopping mall. In that environment, what everyone needed was to find things. And Google was the world’s best tool for finding things. When the noun, Google, became the verb “googled” (as in “I googled your history” or I googled your brand to see where I could buy it”) it was clear that Google had permanently placed itself in the long history of products that changed the world.
But increasingly the internet is not about just finding things. Today people are using the internet more as a way to network, communicate and cooperatively share information – using sites like Facebook, LInked-in and Twitter. Although web usage is increasing, old style “search-based” use is declining, with all the growth coming from “social-based” use: 
Chart source: AllThingsD.com
This poses a very real threat to Google. Not in 2011, but the indication is that being dominant in search has a limit to Google’s future revenue growth through selling search-based ads. And, in fact, while internet ads continue growing in all ad categories, none is growing as fast as display ads. And of this the Facebook market is growing the fastest, as MediaPost.com pointed out in its headline “On-line Ad Spend up, Facebook soars 22%.” In on-line display ads Facebook is now first, followed by Yahoo! (the original market dominator) and Google is third, as described in “Facebook Serves 25% of Display Ads.”
While Google is not going to become obsolete overnight, the trend is now distinctly moving away from Google’s area of domination and toward the social media marketplace. Products like Facebook are emerging as platforms which can displace your need for a web site (why build a web site when all you need is on their platform?) or even email. Their referral networks have the ability to be more powerful than a generic web search when you seek information. And by tying you together with others like you, they can probably move you to products and buying locations you really want faster than a keyword Google-style search. BNet.com headlined “How Facebook Intends to Supplant Google as the Web’s #1Utility,” and it just might happen – as we see users are increasingly spending more time on Facebook than Google: 
Source: Silicon Alley Insider
So, you would think it’s a good thing for Google to launch Google+. Although earlier efforts to enter this market were unsuccessful (Google Buzz and Google Wave being two well known efforts,) it would, on the surface, seem like Google has no option but to try, try again.
Only, Google + is not a breakthrough in social media. By all accounts its a collection of things already offered by Facebook and others, without any remarkable new packaging (see BusinessInsider.com “Google’s Launch of Google + is, once again, deeply embarrassing” or “Google Plus looks like everything else” or “Wow, Google+ looks EXACTLY like Facebook.”) With Facebook closing in on 1 billion users, it’s probably too late – and will be far too expensive, for Google to ever catch the big lead. Especially with Facebook in China, and Google noticably not.
Like many tech competitors, Google’s had a game-changer come along and move its customers toward a different solution. Google Plus will be in a gladiator war, where everyone gets bloody and several end up dead. NewsCorp is finally exiting social media as it sells MySpace for a $550m loss – clearly a body being drug from the colliseum! Even with its early lead, and big expenditures of time and managerial talent, NewsCorp was thrashed in the gladiator war. 
Source: BusinessInsider.com
Google may have a lot of money to spend on this battle, but shareholders will NOT benefit from the fight. It will be long, costly and inevitably not profitable. Yes, Google needs to find new ways to grow as the market shifts – but trying to do so by engaging such powerful, funded and well-positioned competitors as the big 3 of social media is not a smart investment.
And that leads us to why Google + is really problematic. Resources spent there cannot be spent on other opporunities which have high growth potential, and far fewer competitors. BI‘s headline “Google kills off two of its most ambitious projects” should send shudders of fear down shareholder backs. Google had practically no competitors in its efforts to change how Americans buy and use both healthcare servcies and utilities such as electricty and natural gas. Two enormous markets, where Google was alone in efforts to partner with other companies and rebuild supply chains in ways that would benefit consumers. Neither of these projects are as costly as Google+, and neither has entrenched competition. Both are enormous, and Google was the early entrant, with game-changing solutions, from which it could capture most, if not all, the value — just as it did with its early search and ad-words success.
Additionally, Chromebooks is now coming to market. Android has been a remarkable success, trouncing RIM and with multiple vendors supporting it rapidly taking ground from Apple’s iPhone. Only Google has made almost nothing from this platform. Chromebooks offers a way for Google to improve monetizing its growing – and perhaps someday #1 – platform in the rapidly growing tablet business against a very weak Microsoft. But, with so much attention on Google+ Microsoft is given berth for launching its Office 365 product as a challenger. With so much opportunity in cloud computing, and Google’s early lead in multiple products, Google has a real chance of being bigger than Apple someday. But it’s movement into social media will not allow it to focus on cloud products as it should, and give Microsoft renewed opportunity to compete.
Google is setting itself up for potential disaster. While its historical business slowly starts losing its growth, the company is entering into 3 very expensive gladiator wars. First is the ongoing battle for smartphone users against Apple, where it is spending money on Android that largely benefits handset manufacturers. Secondly it is now facing a battle for enterprise and personal productivity apps based in cloud computing where it has not yet succeeding in taking the lead position, yet faces increasing competition from Apple’s iCloud and Microsoft’s new round of cloud apps. And on top of that Google now tells investors it is going to go toe-to-toe with the fastest growing software companies out there – Facebook, Linked-in, Twitter and a host of other entrants. And to fund this they are abandoning markets where they were practically the only game changing solution.
There’s a lot yet to happen in the fast-moving tech markets. But now is the time for investors to wait and see. Google’s engineers are very talented. But it’s strategy may well be very costly, and unable to compete on all fronts. You may not want to sell Google shares today, but it’s hard to find a reason to buy them.
by Adam Hartung | Apr 1, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Openness, Transparency, Web/Tech
Summary:
- Google is locking-in on what it made successful
- But as technologies, and markets, change Google could be at risk of not keeping up
- Internal processes are limiting Google’s ability to adapt quickly
- Google needs to be better at creating and launching new projects that can expand its technology and market footprint in order to maintain long-term growth
Google has been a wild success. From nowhere Google has emerged as one of the biggest business winners at leveraging the internet. With that great success comes risk, and opportunity, as Larry Page resumes the CEO position this year.
Investors hope Google keeps finding new opportunities to grow, somewhat like Apple has done by moving into new markets with new solutions. Where Apple has built strong revenue streams from its device and app sales in multiple markets, Google hasn’t yet demonstrated that success. Despite the spectacular ramp-up in Android smartphone sales, Google hasn’t yet successfully monetized that platform – or any other. Something like 90% of revenues and profits still come from search and its related ad sales.
Investors have reason to fear Google might be a “one-trick pony,” similar to Dell. Dell was wildly successful as the “supply chain management king” during the spectacular growth of PC sales. But as PC sales growth slowed competitors matched much of Dell’s capability, and Dell stumbled trying to lower cost with such decisions as offshoring customer service. Dell’s revenue and profit growth slowed. Now Dell’s future growth prospects are unclear, and its value has waned, as the market has shifted toward products not offered by Dell.
Will Google be the “search king” that didn’t move on?
When companies are successful they tend to lock-in on what made them successful. To keep growing they have to overcome those lock-ins to do new things. The risk is that Google can’t overcome it’s lock-ins; that internal status quo police enforce them to the point of keeping new things from flourishing into new growth markets. That the company becomes stale as it avoids investing effectively in new technologies or solutions.
At Slacy.com (“What Larry Page Really Needs to Do to Return Google to its Start-up Roots“) we read from a former Google employee that there are some serious lock-ins to worry about within Google:
- The launch coordination process sets up a status quo protection team that keeps things from moving forward. When an internal expert gains this kind of power, they maintain their power by saying “no.” The more they say no, the more power they wield. Larry Page needs to be sure the launch team is saying “here’s how we can help you launch fast and easy” rather than “you can’t launch unless…”
- Hiring is managed by a group of internal recruiters. When the people who actually manage the work don’t do recruiting, and hiring, then the recruits become filtered by staffers who have biases about what makes for a good worker. Everything from resume screening to background reviews to appearances become filters for who gets interviewed by engineers and managers. In the worst case staffers develop a “Google model employee” profile they expect all hires to fit. This process systematically narrows the candidates, leading to homogeneity in hiring, a reduction in new approaches and new ways of thinking, and a less valuable, dynamic employee population.
- Increasingly engineers are forced to use a limited set of Google tools for development. External, open source, tools are increasingly considered inferior – and access to resources are limited unless engineers utilize the narrow tool set which initially made Google successful. The natural outcome is “not invented here” syndrome, where externally created products and ideas are overlooked – ignored – for all the wrong reasons. When you’re the best it’s easy to develop “NIH,” but it’s also really risky in fast moving markets like technology where someone really can have a better idea, and implement, from outside the halls of the early leader.
These risks are very real. Yet, in a company of Google’s size to some extent it is necessary to manage launches systematically, and to have staffers doing things like recruiting and screening. Additionally, when you’ve developed a set of tools that create success on an enormous scale it makes sense to use them. So the important thing for Mr. Page to do is manage these items in such a way that lock-in doesn’t keep Google from moving forward into the next new, and possibly big, market.
Google needs to be sure it is not over-managing the creation of new things. The famous “20% rule” at Google isn’t effective as applied today. Nobody can spend 80% of their job conforming to norms, and then expect to spend 20% “outside the box.” Our minds don’t work that way. Inertia takes over when we’re at 80%, and keeps us focused on doing our #1 job. And we never find the time to really get started on the other 20%. And it’s unrealistic to try dedicating an entire day a week to doing something different, because the “regular job” is demanding every single day. Likewise, nobody can dedicate a week out of the month for the same reason. As a result, even when people are encouraged to spend time on new and different things it really doesn’t happen.
Instead, Google needs a really good method for having ideas surface, and then creating dedicated teams to explore those ideas in an unbounded way. Teams that have as their only job the requirement for exploring market needs, product opportunities, and developing solutions that generate profitable new revenue. Five people totally dedicated to a new opportunity, especially if their success is important to their career ambitions, will make vastly more headway than 25 people working on a project when they can “find the time.” The bigger team may have more capabilities and more specialties, but they simply don’t have the zeal, motivation or commitment to creating a success. Failing on something that’s tertiary to your job is a lot more acceptable, especially if your primary work is going well, than failing on something to which your wholly dedicated. Plus, when you are asked to support a project part-time you do so by reinforcing past strengths, not exploring something new.
Especially worrisome is Inc magazine’s article “Facebook Poaches Inc’s Creative Director.” This is the fellow that created, and managed, the new opportunity labs at Google. What will happen to those now?
These teams also must have permission to explore the solution using any and all technology, approaches and processes. Not just the ones that made Google successful thus far. By utilizing new technologies, which may appear less robust, less scalable and even initially less powerful, Google will have people who are testing the limits of what’s new – and identifying the technologies, products and processes that not only threaten existing Google strengths but can launch Google into the next new, big thing. Supporting their needs to explore new solutions is critical to evolving Google and aiding its growth in very dynamic technologies and markets.
The major airlines all launched discount divisions to compete with Southwest. Remember Song and Ted? But these failed largely because they weren’t given permission to do whatever was necessary to win as a discount airline. Instead they had to use existing company resources and processes – including in-place reservation systems, labor union standards, existing airports and gates – and honor existing customer loyalty programs. With so many parameters pre-set, they had no hope of succeeding. They lacked permission to do what was necessary because the airlines bounded what they could do. Lock-in to what already existed killed them.
The concern is that Google today doesn’t appear to have a strong process for creating these teams that can operate in white space to develop new solutions. Google lacks a way to get the ideas on the agenda for management discussion, rapidly create a team dedicated to the tasks, resource the teams with money and other necessary tools, and then monitor performance while simultaneously encouraging behaviors that are outside the Google norms. Nobody appears to have the job of making sure good ideas stay inside Google, and are developed, rather than slipping outside for another company to exploit (can you say Facebook – for example?)
I’m a fan of Google, and a fan of the management approaches Larry Page and Google have openly discussed, and appear to have implemented. Yet, success has a way of breeding the seeds of eventual failure. Largely through the process of building strong sacred cows – such as in technology and processes for all kinds of activities that end up limiting the organization’s ability to recognize market shifts and implement changes. Success has a way of creating staff functions that see themselves as status quo cops, dedicated to re-implementing the past rather than scouting for future requirements. The list of technology giants that fell to market shifts are legendary – Cray, DEC, Wang, Lanier, Sybase, Netscape, Silicon Graphics and Sun Microsystems are just a few.
It’s good to be the market leader. But Larry Page has a tough job. He has to manage the things that made Google the great company it is now – the things that middle management often locks in place and won’t alter – so they don’t limit Google’s future. And he needs to make sure Google is constantly, consistently and rapidly implementing and managing teams to explore white space in order to find the next growth opportunities that keep Google vibrant for customers, employees, suppliers and investors.
View a short video on Lock-in and why businesses must evolve http://on.fb.me/i2dekj
by Adam Hartung | Nov 13, 2009 | Current Affairs, In the Swamp, Leadership, Lock-in
"Rupert Murdoch to remove News Corp's content from Google in months" is the London Telegraph headline. Claiming that Google gets a "free ride" on the newspaper content, the News Corp. Chairman claims he can block Google from referring his content – and that the conclusion will be bad for Google because it will hurt the search engine's ability to add value. He also expects that his newspaper and its website will do fine without Google, including doing fine without any Google-placed ads on the newspapers' web sites.
Really.
Ever heard the phrase "cutting off your nose to spite your face?" It means that you get so mad at something, or someone, that you take a stupid action just trying to get even. Given the gruffness of Mr. Murdoch, I mashed that phrase up into my own explanation of his threat – that he's trying to bite off his own nose.
There is no changing the shift to on-line news readership. People will never again return to reading print-format newspapers. Print demand will continue to decline. Simultaneously, nobody will revert to searching for news on their own – such as by browsing around any particular web site. Users now know they can find news with the aid of powerful search engines, like Google, that deliver them directly to the page that tells them what they want to know. And advertisers now know that they must use services like Google to deliver ads to the pages that present their most likely targets. Advertisers are not willing to accept "views" alone, now knowing that ads can be targeted to specific readers associated with specific page content. Those shifts have happened, and are now trends moving forward. No hoping for "the good old days" will change these shifts.
Google doesn't need the News Corp. newspaper output to succeed as a search engine nor News Corp's pages for its ad placement business. There is so much access to news, from press releases (source news) to bloggers to other newspapers that any individual news source is relatively irrelevant. And Google can place all of its advertisers' ads – whether News Corp. makes its pages available to Google or not.
Simply, News Corp. needs Google. Without Google page referrals, visitors will drop. Lower visitors means fewer ad views means lower revenue. No news organization can stand lower revenues. Simultaneously, News Corp. needs as many advertisers competing for its ad space as possible. To turn down any ad placement service will only hurt revenues further.
Mr. Murdoch said in the article "I don’t believe the media industry can continue to exist in this way." He's right. Media companies are going through a major market shift. But trying to walk away from the #1 search engine and #1 ad placement company is —– foolish. And Mr. Murdoch knows this – because News Corp. owns MySpace and other internet properties. Google may not need News Corp., but News Corp. definitely needs Google
